Good morning, and thank you for joining us today. I'm Laila Danielsen, the CEO of Elliptic Labs. Joining me today is our CFO, Lars Holmøy. I'm pleased to share our continued strong performance and commercial progress. Let me begin with our financial highlights from the third quarter of 2024, which demonstrate our sustained growth trajectory. Q3 2024 revenues from customers ended at NOK 28 million in the quarter, up 29% compared to the same quarter last year. In turn, our year-to-date revenue for 2024 has reached NOK 84 million, representing a 43% increase from NOK 59 million in the same period last year. This robust growth validates our strategic direction and reflects both our expanded market presence and the increasing demand and adoption of our technology solution. I am particularly excited to highlight several strategic and commercial milestones that position us for continued growth.
We recently launched Lenovo Smart Share, a significant advancement in device-to-device interoperability. This solution has received critical acclaim from industry experts , reinforcing our position as an innovation leader in the space. This positive market reception underscores our ability to develop and deliver solutions that address real customer needs. We achieved important progress with our existing relationship, specifically expanding our partnership with a key PC manufacturer. This expansion is notable for two reasons. First, we increased our presence across their laptop portfolio, demonstrating the value we bring to their products. Second, and perhaps more strategically significant, we expanded into their PC accessories for the first time. This represents a new market segment for us and validates our technology's versatility across different product categories and the potential to realize true network effects. In addition, we successfully implemented two AI Virtual Smart Sensors on a single laptop model for the first time.
This milestone demonstrates our advancing technical capabilities, the scalability of our solution, and the growing sophistication of our AI integration. Okay, before we dive into further details, let's take a quick look at who we are at Elliptic Labs and our vision for the future. Elliptic Labs' platform redefined the user experience with AI. Our vision is to build the leading AI software platform for all user experiences, making every device smarter, interoperable, more human, and environmentally friendly. As many of you know, our journey started by building a solid platform in the smartphone segment, where we since 2016 have built an impressive portfolio with some of the largest OEMs across the world. In fact, three of the five top global OEMs are customers of Elliptic Labs, and since our inception, we have launched 149 models, whereof 53 models were launched so far in 2024.
We currently see solid growth in our smartphone deployment. These OEMs want to be at the forefront of the technology development, and we see increased demand for the kind of AI functionality our products offer. Looking at our complete portfolio across smartphones and laptops, we continue to rapidly scale our portfolio of models launched, a central driver of our revenue going forward. Over 1/3 of all shipped products over our history as a company were launched in 2024, and we still have one month to go. Our commercial progress over the last months has solidified our position in the market and added to our foundation to realize exponential growth over the coming years. We have successfully launched Lenovo Smart Share for seamless device-to-device interoperability, where we have seen overwhelming response in the market.
We have added yet another expansion contract for laptops and now, for the first time, included accessories as part of our value proposition, a key trigger to enable network effects across devices for our customers and reinforce our leadership across the ecosystem, and importantly, for the first time, we have launched two AI Virtual Smart Sensors on one laptop model, a proof point of the potential to exponentially increase our revenue across the model portfolio by adding more sensors per model. As stated earlier, we launched Lenovo's Smart Share in Q3. Let's take a step back to see how we're enabling this application, which is driven by our AI Virtual Tap Sensor , which delivers true interoperability between devices. Users can share files from the smartphone to the laptops with a simple tap of their phone on the side of their laptop, enabling seamless and groundbreaking interoperability between devices.
This solution is completely agnostic, which means it supports both iOS and Android, which means it works across Apple iPhones and smartphones from companies like Samsung, Motorola, etc. What is particularly exciting about our product is their inherent network effect. As more devices adopt our technology, the value proposition becomes increasingly more compelling for both our customers and end users, creating a virtuous cycle of adoption and enhancement. With the recent launch of the Lenovo Smart Share on selected models and the extraordinary market response to this application, we see true potential to expand this functionality across Lenovo's portfolio. A key competitive advantage for OEMs is the ability to enable network effects from seamless cross-device sharing across laptops, smartphones, and accessories. Customers are looking for new innovative use cases and the potential to seamlessly apply and integrate applications across all their devices.
To date, Apple is the only player that has truly driven such a network effect, and we have all seen the market penetration and customer stickiness this has provided. We here in Elliptic Labs deliver the same capability and value to our customers. Due to our technology, Lenovo Smart Share has been described as the Apple AirDrop killer for its disruptive device-to-device interoperability capability that is agnostic and has the potential to be applied across not just Lenovo, but all players and operating systems.
The feedback for the Smart Share application has been phenomenal. During Lenovo's Tech World here in 2024, attended by the top management of Lenovo and all the major tech companies, Lenovo's CEO, YY, emphasized Smart Share as the hero feature for the upcoming Aura Edition laptops. This illustrates the value we are providing to our customers, and this is just the starting point. And one more thing.
Our customers understand that to achieve the same network effect as Apple, they must roll out features like this broadly across their whole product line, and talking about other product lines, to further illustrate the value of the seamless device-to-device interoperability, we have also signed yet another expansion contract with an existing PC customer for more laptops, and now, for the first time, including PC accessories such as mouse, keyboard, headset, etc., and for those of you who follow us extra closely, you have probably seen this video before, demonstrating the ease at which Elliptic Labs' AI Virtual Smart Sensor Platform connects laptops and accessories. With this first contract for accessories, we are seeing clear traction for our AI Virtual Smart Sensor Platform across a larger part of their product portfolio.
For the first time, we have also launched two AI Virtual Smart Sensors on one device, the ThinkPad X1 Carbon Gen 13 Aura Edition. Now, let me explain what this entails. We have previously shown the triangle to the right to demonstrate the key levers to underpin our growth journey: more customers, more product, more models. This is where the true scalability of our business model resides. We have earlier today shown you our rapid growth and number of models launched, driven growth across one lever. By adding more applications to each model and continuing to grow the number of models, we have the potential to exponentially grow our revenues: more Virtual Smart Sensors per product with expansion across the product portfolio, commercial, consumer products, and PC accessories, ensuring that they are creating a network effect for the users. So what does this mean for Elliptic?
It means a stronger lock-in, more dependency on our products, as well as that we can charge a higher license price per device. We have previously explained this potential, and now we are seeing it happen together with the world's largest PC maker. Next, our CFO, Lars, will present our financials. Thank you.
Thank you, Laila. The financial performance year-to-date 2024 underscores our strategy effectiveness as we continue to deliver strong growth while maintaining cost efficiency. Let me walk you through the key highlights. Revenue from customers has increased by 43%, reaching 84.3 million NOK compared to 59.1 million NOK last year, same period. The growth reflects both our expanding customer base and increased monetization across existing relationships. The growth in revenue has been achieved without corresponding increase in cost. Our total operating expenses stand at 76.8 million NOK, only marginally higher than last year's 75.2 million NOK, for the same period.
This demonstrates the scalability of our business model. Drilling further on personnel expenses , personnel expenses were NOK 62.3 million, while other operating expenses were NOK 14.5 million . This balanced expenditure underscores our disciplined cost management and operational efficiency. The result of this strong revenue growth and cost stability is an improvement in EBITDA year-to-date. From a negative minus NOK 15.1 million last year, we have achieved a positive NOK 8.6 million this year, delivering an EBITDA margin of 10%. This performance highlights our ability to scale profitable, demonstrating high operational leverage as revenue growth outpaces cost increases. This sets for a strong foundation for sustained profitability and shareholder value creation. In summary, year-to-date 2024 has been a pivotal period for us, with robust revenue growth and a disciplined cost structure leading to a significant improvement in our bottom line. We remain committed to maintaining this trajectory going forward.
Q3 2024 represents another quarter of solid performance, showcasing our ability to grow revenue while keeping our focus on cost management and operational efficiency. Revenues from contracts with customers grew to NOK 28.2 million, a 29% year-over-year increase compared to NOK 21.9 million Q3 2023, while sequentially lower than Q2 2024 at NOK 33.9 million. The growth reflects milestone payments for key laptop contracts and continued shipments in the smartphone and PC segments. Importantly, we have maintained positive EBITDA at Q3 for NOK 0.5 million, a significant improvement from negative NOK 2.9 million same period last year. This highlights the improved cost structure and profitability of our operation. Total operating costs for the quarter were NOK 28.1 million, up from NOK 25.5 million Q3 2023.
This increase is driven by employee benefit expenses, which increased to NOK 23.6 million, up from NOK 20.6 million same period last year, and NOK 17.1 million in Q2 2024 due to the addition of 13 FTEs and salary adjustments this summer. Other operating expenses declined to NOK 4.5 million from NOK 0.4 million in Q3 2023, thanks to reduced sales and marketing costs and a decline in general corporate costs. The addition of 13 new people during the last 12 months underscores our strategic investment into talent to support our future growth. At the same time, disciplined cost management, particularly in sales and marketing, ensures we remain efficient while growing. In summary, this reflects our continued growth trajectory supported by solid revenue growth and improving profitability metrics. We are well positioned to build on this momentum in the coming quarters, driving sustainable value for our stakeholders.
We ended Q3 2024 with a cash balance of NOK 67 million, which will be sufficient to move forward on our business plans. The operating cash flow for the quarter was -NOK 19 million, driven largely by increasing account receivables of NOK 17.7 million stemming from non-cash milestone revenues recognized in the quarter. This is a planned development in line with our business model and the contract structures we have had with our main customer in the laptop market. We recognize the non-cash milestone revenue upon signing on the contract, with the cash effect coming over the following quarters. It's important here to underscore no receivables are overdue. When we entered into the laptop market, we followed standard hardware sensor contract structures with payments upon productions or shipments.
Over time, we have established a strong relationship and added more software features across more devices, and we have been able to renegotiate those payment terms. Going forward, you will see a better alignment of contract signings, revenue recognition, and cash flow for new contracts. We continue to invest in R&D, and investment was NOK 7.8 million for R&D in our AI Virtual Smart Sensor Platform, consistent with previous quarters. The financing cash flow primarily reflects our repayment of borrowing and lease liabilities: NOK 1.6 million for lease liabilities and NOK 1 million for short-term debt repayments, and NOK 0.5 million on interest on lease liabilities. Overall, this quarter's development aligned with our strategic and cash management plans. We have a history of financial discipline and remain confident that our funding position will allow us to grow in line with our ambitions.
Total assets decreased slightly from NOK 356 million in Q2 to NOK 348 million in Q3 due to targeted repayment and planned adjustments. The increase of NOK 17.7 million in current assets is tied to the accounts receivable stemming from revenues recognized during the quarter. This aligns with our planned revenue recognition model, and all receivables remain within expected timelines. Long-term liabilities have been reduced due to repayment of borrowings. Similarly, short-term liabilities decreased, reflecting repayments of lease liabilities and a reduction in trade payables.
The equity remained at 90%, underscoring a robust financial foundation and lower reliance on external debt. This strong equity position provided us with the flexibility to execute growth plans efficiently and confidently. This balance sheet showcases our commitment to maintaining financial discipline while investing strategically in our growth initiatives. We are well positioned to continue driving innovation and expanding market presence without compromising our financial stability.
Next, I will hand it back to our CEO, Laila, to finish up the presentation. Thank you.
Thank you, Lars. We have previously showed you our launches to date. To illustrate our continued commercial progress, let's look at our contract base with one laptop customer. As we are expanding and adding new contracts, Elliptic Labs is truly strengthening our value proposition. Moving up the software stack signifies a transformative leap from being a niche component provider to a strategic enabler of AI-based ecosystem and contextual intelligence. By evolving our AI platform company, we now operate closer to the end user experience, delivering higher value solutions that drive seamless, intuitive device interaction while meeting sustainability demands. This transition not only diversifies revenue streams, but it also increases our price point potential and, in turn, enhances scalability.
Our strengthened position with our customer establishes Elliptic Labs as an indispensable partner for OEMs and a competitive force in the AI-driven future of smart devices. The beauty is that we now have clear offerings across multiple industries like PC, PC accessories, and smartphones. This evolution unlocks significant growth potential, increases customer stickiness, and reduces risk, positioning us as a highly attractive asset in an increasingly connected and AI-powered world. So we have a history where we have spent the past decade building a solid platform based on our own neural networks. We have deep expertise in AI, software, operating system, sensor processing platforms, application, large language models, small sensing models, and so on, and all the way up to the full stack. Our experience ranges from the operating system to application and embedded software integration into complex environments.
We have been working closely with the biggest players in the device ecosystem, like Intel, Qualcomm, AMD, etc. We understand AI and have deep expertise in all AI tools, machine learning, and have strong experience in building solid, accurate-performing models that are scalable. To illustrate, we have separated our journey into three phases, each building on top of the previous phase. As you know, we started out in phase one, replacing hardware sensors with AI Virtual Smart Sensors, building a foundation with our customers. We continue to do so and to expand our positions with our customers for delivering virtual proximity sensors replacing hardware sensors. We are now currently in the second phase, centered around device interoperability. We're moving further up the software stack, delivering true device-to-device interoperability.
Going forward, we are working towards the third phase, truly delivering contextual intelligence as we are working closely with our customers and seeing how we can deliver even more groundbreaking use cases for tomorrow. They need a clear understanding of what's happening within and around the device. The value of unlocking actionable insights and AI-driven use cases through contextual intelligence is immeasurable, and we are truly seeing our potential to extract this value. To be clear, we are advancing toward delivering contextual intelligence by collaborating with customers to unlock actionable insights and groundbreaking AI-driven use cases, demonstrating immense value within and around the devices. This progression enables deeper customer relationships, higher margins, and greater market influence.
Our journey from a component provider to an edge AI platform company demonstrates how this upward movement can transform a business from selling discrete features to delivering comprehensive intelligence solutions that are deeply embedded into the customer ecosystem. This strategic evolution doesn't just boost revenues. It fundamentally enhances our competitive position and long-term value creation potential. Okay, so to illustrate the direction we are moving in, let's look at the current and expanding capabilities of our AI Virtual Smart Sensor Platform . Our journey to deliver contextual intelligence will be reached from the combination of our AI Virtual Smart Sensor platform and our evolving relationships that form a powerful foundation for future opportunities. With our advanced technology embedded in devices and our full stack and deep machine learning expertise, we are well positioned to drive innovation and create new experiences in the market.
This synergy sets the stage for significant growth and potential partnerships, leveraging our platform's capability to shape the future of connected devices and beyond. However, we are not stopping here. We are moving up the software stack to unlock greater value, as we have shared throughout the presentation. Okay, of course, we are not building our products in isolation. We are seeing a strong underlying demand for AI functionality in a rapidly growing market. Elliptic Labs, we are perfectly positioned to capitalize on the future growth of AI-capable PCs due to our AI-based strategic vision and proven ability to deliver innovation at scale. The PC market is undergoing a major transformation, with manufacturers increasingly seeking to integrate AI-driven features that enhance user experience, enable seamless device interoperability, and provide greater contextual intelligence.
Our AI Virtual Smart Sensor platform is uniquely suited to meet these demands, offering OEMs a cost-effective and scalable software solution that replaces traditional hardware sensors while delivering advanced functionality. Our platform aligns with key trends in sustainability by reducing the need for physical components, making it a compelling choice for environmentally conscious manufacturers. As the demand for smarter AI-enabled PCs accelerates, driven by hybrid work, increasing connectivity needs, and consumer expectations for intuitive intelligent devices, Elliptic Labs is positioned as a critical enabler of this transformation. Our strong foundation in tiered AI, proven track record with global OEMs, and focus on delivering high-value software solutions uniquely equipped to ride the wave of the growth in this AI-capable PC market. So, to summarize, let's revisit the assumption we are building our midterm target on and how we plan to realize our long-term potential as a company.
We need to fully monetize our existing contract base. We need to expand our position with existing customers, as we are doing. We need to launch more models with more customers, and we need to add more AI Virtual Smart Sensors per device that we proved in this quarter that we did. Our 43% year-to-date revenue growth, expanding customer relationships, and technical innovation demonstrate the strength of our business model and our ability to create value. We remain focused on executing our strategy, capturing the significant opportunities ahead. We are particularly encouraged by the expansion into new product categories, growing adoption from existing customers, and continued technical innovation that differentiates our offering.
We are on the brink of seeing the implications of true network effects from our solidified cross-device position in the ecosystem, moving up the software stack and becoming a highly sticky and central provider of AI functionality for our customers. Rolling out more of our AI Virtual Smart Sensors per model while continuing to grow our model portfolio at an increasing price point is the key driver of the exponential revenue journey to come, and we are looking forward to you sharing this journey with us. Thank you. We will now take a quick break to just review the questions, and then we will return shortly. Thank you. Thank you, and welcome back. Okay, so first, thank you to the investors that have sent in many questions upfront. I appreciate that, so obviously, we, not obviously, but we have received a lot of questions as well.
So I'll jump straight into it. So I'll start with the first one here. How significant is the improvement in payment terms for new contracts compared to the historical structure? Do you expect improved cash flow for Q4?
All right, good question. There's also, I'm going to combine it also with the non-cash revenue milestones as well. So historically, the contract has been, when you recognize the revenue based on timing and number of volume, that's a revenue recognition. And then shipments of the computers or the phones start, and then we recognize the payment or get paid per license. What we have done now, as our improved relationships with our customers, is the latest contracts we have moved actually payment or invoicing, if I'm correct, the term from shipments actually to the signing of the contract. And yes, we do expect the improved cash conversion in Q4.
Good.
So I'll do another one here. Will time from signing to shipment be shorter? And I'll just answer that. We can control shipments. We cannot control shipments. That is beyond our control. That is up to the customer. However, what we can control, back to the payment terms, is indeed the payment terms, which we have approved starting from our latest contracts, which we will see here taking a positive effect here in Q4. I'll take another question. What has happened to the Xiaomi deal? Well, we can just say that we have more smartphone launches with Xiaomi this year in comparison to last year. So nothing wrong or no complaints from—
The latest was with two phones now in November?
Yeah. Yeah. So when can we expect contracts with new PC OEMs? We can't specifically answer that question. You have to follow and wait to see when we make announcements. So.
And then we have a question about expected positive cash flow.
We do not give forward statements on the cash flow, but looking at the cost base of the company, and as I also addressed in the presentation, we are increasing our revenue, scaling our company much faster than we increase our cost base, so it should be quite easy to do that calculation.
Yeah, and this year, and this is something we will actually address later, but this year, what is the percentage revenue split between smartphone and PC laptops?
Yeah, so typically, we have given that number at year-end. Last year, it was close to 50%-50%. We do not expect a significant change for that. We are growing healthy in the smartphone industry and, of course, growing healthy in the PC vertical, not industry. Thank you.
So I'll take another question here. You have previously stated that the price for a seamless sensor is slightly higher than HPD. Is this still correct? Yes, we see a slightly higher price for the seamless. And then I have another question here about pricing. For accessory sensor product, how do you invoice for this product? I'm sending an invoice. Yeah, but okay, I assume they mean how do we charge for the product? Yes. Okay. So for the accessory, this will be charged for an extra sensor. Like the same, let's say you have the Virtual Human Presence Sensor, it's the price for one. Then you have the Virtual Seamless , it's the second price. And then the 3rd price will be for accessory.
And then on top of that, because it's not that we are for this license that we will support all the accessory-based any accessory at all. It's a type of accessory. So for example, let's say the customer goes for like a mouse, then a set of models, then that is the price. If they go for more models, they will get a higher price. If they go for not just, let's say, keyboard, that will be yet another price license for that. So yeah, so that's how we are licensing that product. So let me see here. Is it the most likely scenario? I'm just going to keep going. We get a lot of questions on licensing here. Sorry, there are lots of questions coming in as we are standing here. Is the most likely scenario that the PC OEMs will go for both seamless and human presence sensor?
And as we recently announced, you saw that we had two sensors, and that's what we're seeing, that the customer that we are talking to, the customers that we're talking to, that they're looking to start with one, as Lenovo did, and then they add another one, and then a third one, and then potentially more. So that's the trend that we are seeing, and the most likely that they will start with seamless and HPD. And then over time, add accessories and potentially other products as well. And then I got another question about products, so I can lead into that. Do you have more products ready for launch from the Smart Sensor Platform ? Yes, we do. We are working very closely with our strategic customers developing, well, it's not like brand new development.
It's like leveraging the underlying technology and then creating new virtual sensors to meet their use cases. And that we have, and we don't say specifically what it is because we don't want to steal the thunder from our customers. We want them to be able to do the announcement, as we saw here with Honor launch. And then it's another question I'm going to ask also in regards to the product is, can we Elliptic, do we own the Virtual Tap Sensor or what we sold to Lenovo, this tap to connect? And yes, we do. So we can sell that Virtual Tap Sensor to other customers. And I'm going to ask another question, if you don't mind, because it's like following up. Do customers ask for exclusivity? Absolutely, they do. They ask for exclusivity.
They ask for us to create something unique, derivative of our Virtual Smart Sensor. Have we signed an exclusivity deal yet? No, we have not. So we can sell our other products to the rest of the market. We expect that there will continue to be negotiations about exclusivity, and in general, an exclusivity deal has a higher value. So we will charge significantly more. So because you want to make sure you don't lose opportunity to generate revenue, so the customer would have to pay for that potential lost revenue. So we are fortunate in that position. Any other numbers? Any questions about any more important numbers?
I think, yeah, when do you—we have already addressed this. When do you expect to report on positive profit? We have a positive EBITDA for the year so far, and any new products in the smartphone vertical?
No, no new products launched. That is launched.
Yeah. I think that was the last one that came in just a second ago.
All right. Very good. Okay. So I appreciate all the questions. Hopefully, we got a good answer for that. So thank you very much and have a good day. Thank you.
Thank you.